Facebook IPO boosts wealth in Silicon Valley

SAN FRANCISCO -- Silicon Valley is once again flush with nouveau riche after a wave of tech IPOs that will be eclipsed by Facebook's.

LinkedIn, Zynga and Yelp — a few of the local start-ups to go public in the past year — raised a combined $1.5 billion in IPOs. But that's chump change compared with Facebook's possible $16 billion offering from its upcoming IPO.

These upstarts and others minted hundreds, if not thousands, of new millionaires. Now, Facebook, shaping up as the largest-ever technology IPO, will add another thousand or more millionaires — and a bunch of billionaires.

Facebook is expected to begin Nasdaq trading on Friday in the largest-ever Internet IPO that could easily value it above $100 billion.

With even a minor first-day pop in trading, Facebook founder Mark Zuckerberg's stock holdings will make him one of the top 10 wealthiest Americans. COO Sheryl Sandberg likely will have more than $1 billion in paper riches, as well. And a long list of venture capital firms with stakes stands to rake in more billions.

The Valley's tech boom is boosting the net worth of area residents so much, regional spending and taxation are providing one of the few bright spots in California's economy.

Facebook's windfall for both regional businesses and California's state budget is "a lot of money," says Jason Sisney, an analyst in the state's Legislative Analyst Office. "This is clearly a big deal for California companies and California taxpayers."

That office estimates Facebook could pump $2 billion into the state's coffers by 2013, mostly for personal income taxes due on stock-based compensation.

The city of Menlo Park, now home to Facebook's expanding headquarters , could take in $24 million a year in retail and lodging businesses from employees of the social network, according to the company.

"It's certainly going to be a giant inflow of wealth into the region from Facebook and companies that follow," said Michael Pachter, an analyst at Wedbush Securities. And wealth will generate more wealth, he says. "The ripple effect is that the wealth that was created will be put into other ideas."

Home prices shoot up

Real estate near Facebook's headquarters is experiencing a boom.

"When you get a significant wealth-creating event like a Google or a Facebook (IPO), it does affect real estate prices," says Geoff Yang, a founding partner at Redpoint Ventures, based in Menlo Park.

In the past year, Zuckerberg bought a $7 million house in Palo Alto. Zuckerberg's former No. 2, Owen Van Natta, a few months ago snagged a house listed at $8.6 million in the same neighborhood.

Sandberg is building a multimillion-dollar modern mansion in Menlo Park.

Topping them all: Russian investor Yuri Milner, whose DST Global venture firm stands to make billions from Facebook stakes, last year bought a $100 million mansion in nearby Los Altos Hills.

Overall, Palo Alto "real estate is already up 10% this year in anticipation of what's going to happen with Facebook," says Vista Wealth Management CEO Michael Spector.

Home prices in the center of Palo Alto are up 29% year over year, according to data from real estate site Zillow.com. Realtors say these areas have long demanded a premium but now are experiencing a wave not unlike when Google went public.